In 2018 Boeing and Embraer announced plans to form a joint venture, and this has just been called off…
In this post:
The basics of the Boeing & Embraer joint venture
In 2017 it was announced that Bombardier would sell a majority stake in the CSeries program to Airbus (the CSeries is now known as the A220).
This was a huge win for Airbus, since it added another very popular jet to Airbus’ product line. Getting into the smaller jet market also gave them a significant advantage over Boeing, as their smallest plane is the 737.
As a competitive response, Boeing and Embraer announced plans to form a joint venture, which would have seen Boeing take an 80% stake in a partnership that would control Embraer’s commercial airplane and services division.
Embraer produces popular regional jets, so this would have made those planes part of Boeing’s product line.
Boeing & Embraer call off deal
Boeing has announced today that it has terminated the Master Transaction Agreement with Embraer, under which the two companies were to establish their new strategic partnership.
Under the agreement, April 24, 2020, was the initial termination date, subject to extension by either party if certain conditions were met. Boeing exercised its rights to terminate the agreement after Embraer did not satisfy the necessary conditions.
Marc Allen, Boeing’s President of Embraer Partnership & Group Operations, said the following:
“Boeing has worked diligently over more than two years to finalize its transaction with Embraer. Over the past several months, we had productive but ultimately unsuccessful negotiations about unsatisfied MTA conditions. We all aimed to resolve those by the initial termination date, but it didn’t happen. It is deeply disappointing. But we have reached a point where continued negotiation within the framework of the MTA is not going to resolve the outstanding issues.”
The planned partnership had received unconditional approval from regulatory authorities, with the exception of the European Commission.
Ultimately we don’t know the exact details of what caused this to fall through, though I suspect there were many factors involved here, not the least of which is that Boeing’s business has changed drastically in the past year, between the 737 MAX issues, and now the anticipated massive drop in demand due to COVID-19.
Bottom line
Boeing and Embraer have called off their joint venture. This isn’t surprising given the current climate, though it increasingly looks like Airbus has the upper hand (by a long shot) as far as the “big two” aircraft manufacturers go.
@Azamaraal
What? Preferring the Dreamliner over the A350? That thing is a horrible experience for people, especially in the economy seats. Airlines crammed 9 in row for a plane that was designed around 8. There’s reports of 787s being involved in strange issues with regards to ILS failures at airports. Cabin crew can lock you out of window controls. The design of the airplane also led for lithium battery fires and issues with Rolls...
@Azamaraal
What? Preferring the Dreamliner over the A350? That thing is a horrible experience for people, especially in the economy seats. Airlines crammed 9 in row for a plane that was designed around 8. There’s reports of 787s being involved in strange issues with regards to ILS failures at airports. Cabin crew can lock you out of window controls. The design of the airplane also led for lithium battery fires and issues with Rolls Royce engines.
Let’s go to Airbus - the A330neo uses a direct variant of the RR engines on the 787 and there have been zero issues. The A350 is a superior aircraft to the 787 and 777. More economical, more advanced, designed around the 9 seats that airlines have been putting in them.
From a passenger experience and engineering perspective, the A350 is a superior aircraft. And the 787 is another example of why American designed and built products are becoming increasingly worthless.
@hal9000
That's kinda funny in a sick kind of way.
Seriously, and probably in the minority, I much prefer the Dreamliner over the A350.
It all goes back to Boeing moving the headquarters out of Seattle. It’s been on bad decision after another with thousands of employees, contractors, and customers paying the price (and with the max, their lives). It’s a shame.
Many Boeing detractors, but there's no denying the fact that they are making some killer products as of late.
I have not the slightest doubt that the respective governments will rescue them, whatever it costs. But on the market, Embraer is definitely better positioned, therefore the Brazilian government will have to invest less.
It would not have been appropriate for Boeing to spend over $4 billion on this JV when its asking for state aid at the same time. Boeing's missteps with the 737 MAX and Bombardier CSeries has propelled Airbus ahead though.
If Trump had the brains not to go with the "trumped up" charges Boeing first presented to demand the 300% duty on the C100/C300 then this would have had a much happier ending.
I certainly did not like Embraer when their state-subsidized turbo props were flooding the market nor do I really like state-subsidized Airbus. Their stupid egotistical A380 killed the best upgraded airplane on the market, the 747-9, while proving the A380 was totally...
If Trump had the brains not to go with the "trumped up" charges Boeing first presented to demand the 300% duty on the C100/C300 then this would have had a much happier ending.
I certainly did not like Embraer when their state-subsidized turbo props were flooding the market nor do I really like state-subsidized Airbus. Their stupid egotistical A380 killed the best upgraded airplane on the market, the 747-9, while proving the A380 was totally uneconomical.
So instead of Bombardier and Boeing probably producing a great synergism we now have this mess where Airbus will be the winner. Some Boeing detractors think that Airbus designed the A220 and love it for its unique new design.
Hopefully Boeing wills survive but they have sure made some dumb choices recently. Ditching Embraer is probably one of their better.
Most Boeing planes are just primitive compared to their Airbus counterparts - especially the narrow-fuselage 737 even without the MAX debacle. Let’s rewrite the marketing rhyme: “If it’s Boeing, I ain’t goin!”
Hope Boeing has to go bankrupt
Good bye Boeing, hello Chinese government.
If not, goodbye Embraer also.
All I can say here is this.... if your an attorney and you work for Boeing you have job security for a long, long time!!!
Already had enough hurdles domestically in Brazil, but the EC issue dead-ended it as there was so little room to maneuver. With issues internally and weaker position of Bolsonaro presenting uncertainty, they ran down the clock to get out.
In the long term it's the best thing for Embraer , maybe they can form an alliance with Asia . Embraer management are reasonably good whereas Boeing's executives are just greedy time wasters , why would anyone want an alliance with Boeing ?
Phoning it in
This is very good news at this is a step to preserve competition.
From the Seattle Times:
The Brazilian jetmaker indicated it will take legal action against Boeing, saying it “will pursue all remedies against Boeing for the damages incurred by Embraer as a result of Boeing’s wrongful termination.”
Boeing could have helped or partnered with Bombardier instead of trying to put the screws to them over the C-Series. That drove Bombardier to hand over the C-Series/A220 to Airbus for a song. Along with the entire 737 MAX debacle, Boeing's management has FUBAR'd what was once one of America's (and the world's) greatest manufacturers. Amazing what Boeing management has (sadly) accomplished.
Having been a customer and operator of Boeings in the past, and Embraers today, I can't say that I am shedding tears over this.
Boeing cancelled the agreement in bad faith because it simply can't spare the $4.5 Billion or so that it committed to pay for the JV. Any rationalizations Boeing offers are just that, rationalizations. Boeing is practically insolvent without a bailout or expensive offering. Look for a big lawsuit from Embraer.